Alberta’s New Government Means Uncertainty for Canada’s Oil Industry


Alberta’s New Government Means Uncertainty for Canada’s Oil Industry


By Matthew Morgan for Global Risk Insights

The May provincial election in Alberta, Canada saw a once-in-a-generation systemic shift in the province’s politics.

Traditionally a bastion of conservative politics, Alberta saw the dominant Progressive Conservative Party lose 60 seats and come in third after 44 years in power and seven consecutive majority governments.

In its place, the leftist New Democratic Party surged from 4 seats before the election to 53, enough to form a majority government. The Progressive Conservative Party is closely tied to the province’s burgeoning oil industry and is a tireless advocate for the continually delayed Keystone XL pipeline that would carry Alberta tar sand oil to refineries in Texas for processing and export.

The Alberta Progressive Conservative Party also had strong linkages with the governing federal Conservative party of Stephen Harper. The Prime Minister’s riding is in Alberta, and Jim Prentice, the Progressive Conservative leader, previously served as a cabinet minister of Stephen Harper.

As Canada prepares for a federal general election in the fall, the collapse of an aligned provincial government is likely to unsettle many federal conservatives and force a revaluation of electoral strategy, as Alberta can no longer be assumed to be a conservative heartland.

While Alberta had been undergoing an economic boom for the past several years due to increasing global demand for oil, the collapse of the price of crude earlier this year has had a disastrous effect on its economy. The province rapidly went from a surplus to a five billion dollar deficit. Cutbacks in health, education, and other social services followed.

When asked who was responsible for the quick decline in Alberta’s economic fortunes, Jim Prentice responded that Albertans needed to only “look in the mirror” if they wanted to know who was to blame.

Coming from a government that many viewed as overly reliant on the oil sector and with questionable economic management skills, support for the formerly unassailable Progressive Conservative government began to rapidly drain away.

A proposed budget, which raised income taxes and individual user fees across the board while refusing to raise taxes on corporate or oil royalties, sealed the fate of the governing Progressive Conservatives. A strong debate performance by the New Democratic Party leader, Rachel Notley, also helped in their success.

In contrast to its predecessors, the incoming New Democratic Party government in Alberta has promised a sharp change in policy, particularly when it comes to the oil industry. A review of the royalty rates paid by oil companies, some of the lowest in the world, is already in the planning stages.

Further shifts – such as the end of the practice of using provincial dollars to promote the expansion of oil pipelines across national and international borders, and a promise to focus on addressing climate change issues – means that the oil industry in Alberta is entering a new phase, with a government now considerably less amenable to its economic interests.

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